Gold falls, posts sharp weekly drop on Fed worries

Reuters (02/11) - Gold fell about 1 percent on Friday, posting its biggest weekly loss in seven weeks, as renewed anxiety about the U.S. Federal Reserve could scale back its bond-buying stimulus prompted bullion investors to reduce positions.

The precious metal was down 3 percent for the week, reversing two consecutive weekly gains.

Richmond Fed President Jeffrey Lacker said on Friday that the U.S. labor market has recovered enough in the last 14 months to allow the central bank to reduce its bond-buying stimulus.

Any sign that the Fed will reduce its $85 billion monthly bond-buying program is likely to weigh heavily on gold prices. Funds and institutional investors have in recent years bought gold as a hedge against inflation and monetary actions by central banks.

Spot gold was down 0.9 percent at $1,311.50 an ounce by 2:57 p.m. EDT (1857 GMT), extending Thursday's 1.4 percent slide. Spot gold has ended lower every day this week.

U.S. Comex gold futures for December settled down $10.50 to $1,313.20 an ounce, with trading volume about 20 percent below its 30-day average, preliminary Reuters data showed.